Sep 2, 2014
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January 2014 Archive for Farmland Forecast

RSS By: Marc Schober, AgWeb.com

Marc Schober is the editor of Farmland Forecast an educational blog devoted to investments in agriculture and farmland.

USDA Weekly Exports: Corn Sales Spike

Jan 30, 2014

 U.S. net corn sales jumped to its highest weekly mark since October of 2013. U.S. soybean exports were on the rise with a 23% increase against the 10 week average.

Weekly U.S. net corn sales for the week ending January 24th in the 2013/2014 marketing year were 1,831,900 metrics tons (MT), a 165% increase from the previous week and 150% increase from the prior 10 week average. Increases were reported from Japan, unknown destinations, Spain, Egypt, and South Korea. Decreases were reported from the French West Indies. Exports were 1,004,100 MT, a 26% increase from the prior week and 19% increase from the prior 10 week average. The primary destinations were Japan, Mexico, Colombia, Peru, and South Korea.

Weekly net soybean sales were 494,800 MT, a 30% decrease from the previous week and 41% decrease from the prior ten week average. Increases were reported from China, Netherlands, Mexico, Japan, and Spain. Decreases were reported from unknown destinations and Cuba. Exports were 2,114,600 MT, a 38% increase from the prior week and 23% increase from the prior ten week average. Primary destinations were China, Netherlands, Japan, Spain, and Germany.

Weekly net wheat sales were 794,900 MT, an 89% increase from the previous week and 92% increase from the prior ten week average. Increases were reported from Japan, South Korea, Nigeria, Philippines, and Taiwan. Decreases were reported from unknown destinations, Indonesia, and Guatemala. Exports were 422,000, a 0.3% increase from the prior week and a 4% decrease from the prior ten week average. Primary destinations were Nigeria, Sri Lanka, Mexico, Japan, and Guatemala.

1 30 14 Sales

1 30 14 Exports

For daily articles on farmland and agriculture, visit www.farmlandforecast.com 

Rural Economic Growth Slows in January

Jan 22, 2014

 The rural economy expanded for the 16th month in a row according to Midwestern bankers, despite lower commodity prices. Bankers are concerned though about the rural economy over the next six months and the uncertainty of the Farm Bill. Farmland values and farm equipment sales continue to trend lower from last month, which can be attributed to the uncertainty of the commodities market entering 2014. 

The Rural Mainstreet Index, ranging between 0 and 100 with 50.0 representing growth neutral, decreased to 50.8 from a 56.1 in December, remaining above growth neutral for the 16th month in a row. Ernie Goss PhD., economist at Creighton University, suggests the reason for slower rate of growth is due to the decrease in corn, soybean and wheat prices. Goss stated, "Over the past year, corn, soybean and wheat prices have declined by 41 percent, 10 percent and 16 percent, respectively. Weaker farm prices are clearly negatively influencing the rural economy." RMI Jan 2014 Rural Mainstreet Index

The farmland price index decreased to 43.8 from 47.0. Goss believes the decrease in commodity prices have influenced farmland values. "This is the second straight month that the farmland and ranchland-price index has moved below growth neutral. As agriculture commodity prices have moved lower, so have farmland prices. On the other side of the economic coin, ranchers and livestock producers are experiencing record prices and a very healthy economic outlook," commented Goss.

RIM Jan 2014 Farmland Price index

Farm equipment sales sank to 41.0 from 44.3. Goss again attributes falling commodity prices to the decline in equipment sales saying, "Over the past year, commodity prices for all farm products have declined by roughly 8 percent. This has significantly reduced farmers’ willingness to undertake major agriculture equipment purchases."

Bankers were asked this month about ending the Federal Reserve’s bond buying program (QE3) and the impact of the EPA’s recommended cuts to required ethanol blending if implemented. Nearly half of the bankers want the Fed to continue the bond buying program dependent on data, while 27.2% wanted QE3 to be completed by the end of 2014. The majority of bankers believed the EPA’s recommended cuts to the ethanol mandate would have a modest negative impact on the rural economy.

Table 1: Rural Mainstreet Economy Last Two Months and One Year Ago: (index > 50 indicates expansion)

 

Jan-13

Dec-13

Jan-14

Area economic index

55.6

56.1

50.8

Loan volume

39.0

66.7

57.8

Checking deposits

78.1

66.0

68.2

Certificates of deposit and savings instruments

42.2

37.2

41.6

Farmland prices

71.5

47.0

43.8

Farm equipment sales

63.8

44.3

41.0

Home sales

55.6

53.1

49.3

Hiring

52.4

56.9

53.8

Retail business

44.5

54.7

46.2

Confidence index (area economy six months out)

55.5

47.0

49.2

Source: Creighton University

Survey

This survey represents an early snapshot of the economy of rural, agricultural and energy-dependent portions of the nation. The RMI is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy.

For daily articles on farmland and agriculture, visit www.farmlandforecast.com

WASDE and Grain Stocks Report: Corn Ending Stocks Diminish Due to Decreased Production

Jan 10, 2014

The USDA's estimate for the final 2013/14 corn yield dropped an astoundingly 1.6 bushels per acre, which brought U.S. ending stocks and total production down as well. Corn stored in all positions as of December was up 30% year over year. The USDA continues to set the floor for domestic soybean ending stocks at 150 million bushels, by increasing U.S. production, but also increasing demand.

Corn

U.S. corn production for 2013/2014 was estimated at 13.9 billion bushels, a 64 million bushel decrease due to a reduction in production estimates. Though harvested acres were increased to 436,000 acres, the estimated average yield was decreased to 158.8 bushels per acre from 160.4 bushels per acre.

Domestic corn use for 2013/2014 was raised by 100 million bushels due to an increase in feed and residual use. Corn used for ethanol production was estimated 50 million bushels higher due to strong weekly ethanol production and higher 2014 gasoline consumption forecasted from the Energy Information Administration. Corn ending stocks for 2013/2014 were 161 million bushels lower to 1.6 billion. Projected season-average price range for corn in 2013/2014 is $4.10 to $4.70 per bushel.

Global corn production is increased 4.3 million tons due to increased production in China. A 6.0 million ton increase in Chinese corn production reflected the latest upward revision by the China National Grain and Oil Information Center, indications from the National Bureau of Statists for total 2013/2014 grain production, and review of growing-season weather.

WASDE Ending Stocks January 2014

USDA reported 10.4 billion bushels of corn on hand for December 1, 2013, a 30% increase from a year ago. Of the total stocks, 6.38 billion bushels are stored on farms, up 39% to last year. Off-farm stocks were at 4.05 billion bushels, up 17% from a year earlier. September-November 2013 disappearance was 4.32 billion bushels, compared to 3.74 billion bushels a year ago.

Soybeans

U.S. soybean production for 2013/2014 increased 31 million bushels to 3.289 billion due to increased yield and harvested area.  Soybean yield is up 0.3 bushels per acre to 43.3 bushels per acre.  Exports for soybeans increased 20 million bushels to 1.495 billion bushels.  The increase in exports was due to record shipments during the first quarter and strong sales in December. 

Ending stocks for 2013/2014 are unchanged from last month remaining at 150 million bushels. U.S. season-average price forecast for soybeans in 2013/2014 was narrowed 25 cents on both ends of the range to $11.75 to $13.25 per bushel.

Global oilseed production for 2013/2014 increased 3.6 million tons moving the estimate to a record 505.9 million tons.  Global soybean production increased 1.9 million tons moving the estimate to 286.8 million tons due to gains from the United States and Brazil.

Soybeans stored in all positions increased 9% compared to last year with 2.15 billion bushels as of December 1, 2013. Stocks stored on farms totaled 955 million bushels, a 5% increase from a year ago. Off-farm stocks increased to 1.19 billion bushels, up 13% from last December. September-November 2013 disappearance totaled 1.28 billion bushels, an increase of 4% from last year.

Wheat

U.S Wheat supplies for 2013/2014 remain unchanged for the month, but projected ending stocks increased 33 million bushels due to lower expected use. Wheat exports are estimated 25 million bushels higher due to lower expected competition from Argentina and strong pace of sales and shipments to Brazil’s milling wheat market. Projected 2013/2014 season-average price was 10 cents lower at the midpoint and narrowed at both ends of the range to $6.60 to $7.00.

Global wheat supplies for 2013/2014 were raised 1.5 million bushels to 888.8 million tons with production increases for China and FSU-12 more than offsetting reduction for Argentina and the European Union.

Wheat stocks decreased 12% from last year with 1.46 billion bushels being reported on December 1, 2013. On-farm stocks were estimated at 399 million bushels, down slightly from last December. Off-farm stocks were down 16% from last year, coming in at 1.06 billion bushels. The September-November 2013 disappearance was 407 million bushels, down 6% from December of last year.

Outlook

As we close the books on 2013, we look to the future of agriculture in 2014. What will South America produce in the coming months? How fast will China's demand for agriculture products rise? When will a Farm Bill get passed? What is the future of the Renewable Fuels Standard? We will be following these events and others as they unfold. 

For daily articles on farmland and agriculture, visit www.farmlandforecast.com 

Farmland Values Steady Despite Decreased Crop Prices

Jan 02, 2014

Bitterly cold winter temperatures have been present throughout December in the Corn Belt creating havoc for late fall farm tasks to be completed. Many tile projects were cut short this year due to the early hard frost. The deep frost that occurs in the U.S. Corn Belt is welcomed by farmers in winter because the frost helps kill unwanted fungus, pests, and weeds in the soil. Additionally, frost naturally helps battle soil compaction by expanding and contracting from fall to spring helping add oxygen to the soil.

 

 

 

The Chinese have been continually rejecting U.S. cargos of corn and DDGs since mid-November due to the presence of a currently unapproved GMO trait, MIR 162. The Syngenta developed GMO trait has been in the process of being approved by China for years and most recently was resubmitted for Chinese approval in November 2013. MIR 162 is currently permitted in the U.S., Japan, and Europe. To date, China has rejected 665,000 metric tons of U.S. based corn shipments, according to the Wall Street Journal. The USDA projected China to imported seven million metric tons of corn in the current marketing year that began on October 1, 2013.

 

 

 

Grain Prices

 

 

 

March corn prices were nearly unchanged in December and closed at $4.22 per bushel. Despite concern regarding Chinese demand for U.S. corn due to rejected cargos throughout the month, foreign and domestic corn demand are strong. Margins as high as $0.50 per gallon are incentivizing ethanol producers to ramp up production. The USDA estimated U.S. ending corn stocks 95 million bushels lower to 1.792 billion bushels in the December WASDE Report, due to increased demand around the globe. 1.792 billion bushels would be the highest U.S. ending corn stocks since 2005/06.

 

 

 

January soybean prices decreased by 1.8% this month, closing at $13.12 per bushel. The USDA estimated U.S. ending soybean stocks 20 million bushels lower at an alarming 150 million bushels, due to an increased pace of exports this month. Due to very low supplies, soybean demand has been rationed. Additionally, the South American crop was planted without major weather concerns.

 

 

 

March wheat prices steadily declined throughout December by 10.4% and closed at a 19-month low $6.05 per bushel. Ample global supplies derived from increased production in Australia and Canada has been a key factor in dragging wheat prices lower. Recent Russian estimates marked the Russia wheat crop nearly 5% higher than the USDA at 54 million metric tons. The USDA estimated U.S. ending wheat stocks 10 million bushels higher this month, due to weak exports and larger than expected imports.

 

 

 

South American Crop Condition

 

 

 

The majority of the South American soybean crop finished being planted in early December throughout favorable weather conditions. Weather concerns quickly elevated as extremely hot and dry temperatures were present in Argentina and areas of Brazil mid-month before easing with timely rains last weekend. Brazil will plant 73.9 million acres of soybeans and Argentina will plant 50.1 million acres of soybeans this year, according to World Oil.

 

 

 

The maturity of corn in Argentina and Brazil is variable. Any time throughout December, January, and March, corn will be pollinating and any hot or dry weather could damage yields. Persistent extreme weather would cause even greater yield loss. We will be closely monitoring the weather in South America throughout the growing season ahead.

 

 

 

Farmland Values

 

 

 

Farmland in the state of Iowa increased 5.1% year over year to $8,716 per acre, according to Iowa State University's annual Farmland Value Survey released this month. The 5.1% increase marks only the second time an annual value increase was less than double digits since 2003. The overwhelming majority of Iowa farmland buyers, 80%, were farmers this past year.

 

 

 

The Creighton University farmland price index contracted to 47.0, the lowest level since December 2009. Professor Ernie Goss noted, "This is the first time in four years that the farmland-price index has moved below growth neutral. As agriculture commodity prices have moved lower, so have farmland prices."

 

 

 

We have still been sourcing attractively prices properties for sale across the Corn Belt throughout December. Farmland prices that have decreased are the irrational, outlier, sales. Less and less irrational prices are being paid for farmland, but fair market values are still as strong as ever.

 

 

 

Outlook 

 

 

 

U.S. farmers are already planning out their 2014 crops and if the soybean/corn spread widens, farmers may switch corn acres to soybean acres. Typically, if soybean prices are 2.5 times higher than corn, farmers can justify the switch. Currently the ratio is at 2.54 for new crop prices in 2014. If soybean acres absorb such a shift, watch to see how corn prices react to a decrease in supply.

 

 

We will be watching the Chinese MIR 162 approval closely and the weather in South America throughout January. The world is depending on and the markets have priced in above average corn and soybean crops in both Argentina and Brazil. Any weather changes will affect prices.


For daily articles on agriculture and farmland, visit www.farmlandforecast.com  

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